Four steps that can help you navigate 2025’s market downturn due to tariff turbulence

This year, tariffs have emerged as a significant wild card for global markets, creating unprecedented uncertainty that is impacting both businesses and consumers. This uncertainty is making it difficult for businesses to plan their spending and hiring, while consumers are pulling back on their spending. As a result, both consumer and corporate confidence have been dampened, fueling market volatility.

Though it is easier said than done, we encourage investors to remember that what’s in the headlines today doesn’t necessarily reflect the long-term outcomes you will achieve through a disciplined and well-diversified portfolio strategy.

What’s happening

The announcements on April 2 (“Liberation Day”) provided some clarification, but the tariffs are higher and wider ranging than many people expected. These moves will push the average effective U.S. tariff to 20%–25%, a significant increase from 2.3% in 2024. This has led to a drop in stock prices and a rally in “safe haven” assets.

Currently, the U.S. government is sticking to its stance on tariffs, and it might take a while to finalize any deals with other countries. The implications of these tariffs could be significant, raising economic concerns and, likely, consumer prices. Tariffs act as a tax on consumers, reducing disposable income and spending. The uncertainty can also negatively impact business investment and activity, despite the intent of the policy to boost U.S. manufacturing. As a result, investors should expect that market volatility could continue.

What you can do

It’s difficult to predict short-term market movements, and there are potential risks associated with frequently altering investment strategies based on market fluctuations. That’s why it’s important to align your asset allocation with your time horizon and goals, rather than reacting emotionally to market changes.

Here are four key ways investors can help protect their investment portfolios during periods of stock market volatility.

Maintain a long-term perspective: Focus on long-term goals and remember that although the cause and duration of volatility varies, recoveries do eventually follow.
Confirm your asset allocation: Evaluate your asset allocation to ensure it is still consistent with your objectives and takes the appropriate level of investment risk. If you do make changes during a volatile period, try to keep them small, rather than taking bold steps that could have a significant negative long-term impact on your plan.
Adjust saving and spending: Monitor and adjust your saving and spending habits to mitigate the impact of market downturns. Prioritizing your spending goals as part of a broader financial plan can help you make these important decisions.
Review your cash contingency: Holding a cash reserve can provide a safety net during market volatility, helping investors avoid making impulsive decisions.

To weather volatility over the long term, it’s important to have a financial plan and a diversified portfolio in place. If you don’t, it may benefit you to work with a financial professional to build a plan with your unique goals, risk tolerance, and time horizon in mind.

There are benefits to staying invested in equities, even during volatile times, due to the long-term growth potential of stocks. By focusing on your long-term goals and leveraging our expertise, we’ll continue to help you power through economic uncertainty.

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